Diesel hits record high as Saudi pipeline shutdown deepens oil crisis

Oil prices jumped sharply on Monday after Houthi drone strikes forced Saudi Arabia to shut down its critical East-West Pipeline, compounding supply disruptions already roiling global energy markets and pushing diesel fuel to new record highs ahead of the Federal Reserve's policy meeting this week.

Brent crude climbed more than 4% to peak at $109.50 a barrel before easing, while U.S. crude topped $103, according to Al-Monitor. The pipeline, which carries oil from production facilities on the Persian Gulf coast across the Arabian Peninsula to the Red Sea port of Yanbu, will be "out of service for weeks" as damage is repaired, according to two regional officials cited by the Associated Press. Saudi Arabia's energy ministry said Friday the shutdown was "a precautionary measure" but did not provide a timeline for restoration.nbcnews+2

A Cascade of Supply Disruptions

The pipeline closure adds to an already dire picture in the Persian Gulf. Traffic through the Strait of Hormuz, effectively blocked by Iran since the start of the U.S.-Israel war, has slowed to a trickle — just 14 vessels on Sunday and as few as nine on Thursday, according to MarineTraffic data cited by NBC News. A planned meeting between Iran and Gulf Arab states to discuss the strait was postponed Sunday, with Oman's foreign minister citing the need for "consensus" and Tehran saying the delay came at Riyadh's request.aljazeera+2

The Houthis, meanwhile, made "sweeping gains" tightening their grip on the Bab el-Mandeb Strait, another chokepoint for global shipping. Storage at Yanbu could sustain Saudi exports for only five to seven days, warned Suvro Sarkar, head of energy research at DBS Bank.nbcnews+1

Diesel Records and Inflation Fears

The oil shock sent fuel prices climbing further. The national average for diesel reached $6.23 per gallon on Monday, a new all-time high, while regular gasoline rose to $4.31 per gallon, according to AAA data reported by NBC News. Diesel prices have soared 75% since the start of the year.nbcnews

"The cost of diesel gets into just about everything," KPMG chief economist Diane Swonk told NBC News. "From running a farm … [to the] cost of food, but also everything across the economy that's shipped".nbcnews

The inflationary pressure arrives at a sensitive moment. The Federal Reserve is widely expected to raise interest rates by 25 basis points this week to a range of 3.75%–4%, according to KPMG and MUFG Research, a reversal from earlier expectations of rate cuts.kpmg+1

Trump Intervenes on Diesel

President Trump on Monday said Ukraine and Russia had agreed to stop attacking each other's energy infrastructure, writing on Truth Social that "the World's Diesel price rise is mostly caused by the Russia/Ukraine War, not Iran," according to CNBC. Neither Kyiv nor Moscow immediately confirmed the claim. The announcement followed Trump's remarks Sunday in Ireland urging Ukrainian President Volodymyr Zelenskyy to "stop knocking out diesel fuel in Russia". Russia banned diesel exports in July after escalating Ukrainian strikes on its refining capacity, and ING analysts noted Monday that "further extensions" of the ban remain likely.cnbc+2